Budget 2017: Waugh Zone Special

Five things you need to know about the politics of Budget 2017

1. FIT FLOP

Philip Hammond’s first autumn Budget was meant to get the country ‘Fit for the Future’. But just three minutes into his speech, the Chancellor himself revealed that in coming years Britannia would be as fit as an ageing smoker with a weight problem. And that’s even before Brexit.

Yes, the UK’s vital statistics from the official Office for Budget Responsibility were not just bad, they were very bad. Dragged down by our low productivity, the nation will grow much less than expected, taking a whopping £65bn out of our economy over the next five years, compared to previous forecasts. That downgrade was the worst since 1983, when Geoffrey Howe was in the middle of his Thatcherite revolution.

Hammond trilled on about his plans for the highest infrastructure spending in 25 years and the “first sustained decline in debt” in 17 years. But it was that growth reduction that trumped them both in the historic stats stakes. And the OBR had more bad news: it expects wages to rise by just 2.3% next year, down from 2.7% previously. Pay increases won’t hit 3% (the current inflation rate) until 2021, a year later than thought. Those are figures that really matter to millions.

Unveiling a £25bn spending spree, Hammond undermined his own ‘Fiscal Phil’ reputation by spending cash he’d squirreled away last year. The OBR dubbed this a “significant near-term fiscal giveaway”. It further sprinkled yet more salt into his wounds, predicting that Hammond would break his new fiscal rule of getting a surplus by 2025, and warning it may not happen until 2031. Oh, and it said borrowing would increase by £53 billion by 2021/22. Worst of all for those looking for light at the end of the tunnel, the Institute for Fiscal Studies warned yet more austerity and spending cuts would loom after Brexit. The Chancellor’s Budget was full of lame gags, but if the voters think the joke is on them, they’ll have the last laugh.

2. STAMP PEED

When he was at the IFS, Robert Chote made a name for himself as the man who could unravel a Budget quicker and better than anyone. He’s now the head of the OBR, but it seems old habits die hard. Hammond had barely sat down when the watchdog bared its teeth and bit deep into his battered red box.

The traditional IFS ‘Day Two Takedown’ certainly felt like it had come a day early as the OBR proceeded to shoot the Chancellor’s big Budget ‘rabbit’– his stamp duty cut – right between the eyes. In the traditional briefing with journalists outside the Commons chamber, Treasury officials trumpeted the policy and declared it would help a million people.

But as Hammond’s aides spoke, the OBR verdict filtered through and it was withering: the stamp duty cut would help sellers more than buyers, was open to abuse and would at most mean a paltry 3,500 more people getting a new home than otherwise. Just as worryingly, stamp duty was not the only housing policy that was peed on. The wider package seemed thinner than first sold, and not a single new home is guaranteed by the new set of loans and incentives. The £44bn trumpeted by Hammond was in fact just £15bn in new money and little of that will go on actual construction, critics claimed.

For those worried about losing their (rented) homes due to Universal Credit, there was some relief in the announcement of a cut in waiting time to five weeks. Yet the extra funding won’t come into effect until January, leaving the Government still facing the PR nightmare of families going without benefit over Christmas as UC rolls out to new areas. The small print included a hint of changes to the ‘taper rate’ next year though, so maybe David Gauke is being listened to.

3. BREXIT BILLS

There’s been much talk about Brexit bills of late, but Hammond added a new twist to that phrase as he set aside £3.7bn in spending on preparations for our exit from the EU (that’s £3bn to come and £700m already spent). He went further and said: “I stand ready to allocate further sums if and when needed. No one should doubt our resolve!” That exclamation mark is not mine, it’s actually on the official Treasury record of his speech.

Labour went swiftly on the offensive about how that £3.7bn figure was in fact more than Hammond was devoting to extra spending on the NHS – and was never plastered on Boris’s bus. Yet few Brexiteers have ever held any love for the Chancellor and some wonder if he really ever intends to spend the money promised. Their suspicions were heightened by a Red Book table that suggested the UK would continue to contribute £3.5bn every year even after 2019. The Treasury said this was a mere academic accounting quirk and shouldn’t be taken seriously.

Meanwhile, Robert Chote’s OBR (have I mentioned them?) was pretty scathing about the lack of ‘no Brexit’ or ‘soft Brexit’ or indeed ‘any Brexit’ assumptions. The watchdog’s report reveals that when they asked the Government for Brexit details, they were pointed towards the PM’s Florence speech. “Given the uncertainty regarding how the Government will respond to the choices and tradeoffs it faces during the negotiations, we still have no meaningful basis on which to form a judgement,” it says. I think that’s what young people call a ‘burn’. The OBR also repeats its warning that Brexit “slows the pace of import and export growth over the 10 years” after the EU referendum. Chote is impeccably independent, but that sounded like a riposte to Tory MPs who have dismissed his “lunatic” “soothsayer” forecasts in the past.

The NIESR think tank added its own warning that “an exit involving a sudden stop” [aka Hardest of Hard Brexits] would pose a “significant upside risk to productivity, as well as the prospects for a sustained world recovery”. One more thing on Brexit may worry some Tory MPs. Hammond welcomed the OBR forecast that there would be 600,000 more in employment by 2022. What he failed to mention was that the OBR expects three-quarters of those jobs will have to be filled by new migrants.

4. HEALTH GAP

The Budget’s £2.8bn package of measures for the NHS includes an immediate £350m to allow trusts to plan for winter, a further £1.6bn in 2018-19 and the rest in 2019-20. But the emergency cash medicine was nowhere near the £4bn of extra funding demanded by NHS chief exec Simon Stevens and think tanks such as the King’s Fund.

Even Sir Bruce Keogh, the medical director for NHS England and a loyal ally of Jeremy Hunt in pushing through the junior doctor contract, was moved to protest. He tweeted his ‘personal view’ that the Budget failed to plug the “funding gap”, adding it was “worrying that longer waits seem likely/unavoidable”. NHS England chairman Sir Malcolm Grant added: “We can no longer avoid the difficult debate about what it is possible to deliver for patients with the money available.” And those are not politicians, they’re public officials.

Health Service Journal said that the Government and the NHS were now ‘on collision course’ and as Stevens’ high-stakes poker game has failed, questions may now be asked about how much longer he will stick around. Critics also pointed out that not a penny extra on social care was allocated today, with Hammond preferring to keep the whole thing in the long grass of a policy review. A Tory whip saying Corbyn should be in a care home wasn’t a good look either.

Hammond’s offer to fund nurses’ pay from Treasury coffers was significant, though the lack of specifics today leaves many staff wondering when the ‘jam tomorrow’ will be delivered, and whether it will be bittersweet. Just as worrying for all those Tory MPs who were told on the doorstep in June that it was time for a pay rise for public sector workers, the Treasury suggests only nurses will get special treatment.

5. DEAF CON TWO

All of which brings us to the politics of this most unpolitical Chancellor and his autumn Budget. Hammond lashed out today at Theresa May’s former chief of staff Nick Timothy, saying “we are all in politics to make peoples’ lives better” (the very quality Timothy claimed he lacked). He was also self-confident enough to ridicule Michael Gove’s use of “long, economicky words”. Yet the Chancellor was forced (perhaps by No10?) to admit his tin ear for public opinion. Having gaffed this weekend that there are no unemployed in Britain, he today had this semi-apology: “I am acutely aware that 1.4 million people out of work is 1.4 million too many”.

Having said in the wake of the snap election disaster that “I’m not deaf” to public concerns, he used the Budget to claim he really was listening to worries about the cost of living. The backbench 1922 Committee gave him a decent reception on Tuesday night and even former critic Nadine Dorries (who’d called on him to quit) said it was a “stellar Budget”. Some Labour MPs quietly confide that their party should be much further ahead in the polls and that Tory sound money is still a strong sell. But while Tory MPs may be pleased Hammond has steadied the ship after weeks of resignations and rows, some of them just as quietly mutter that both Hammond and May are as robotically incapable and politically deaf as each other.

Critics of this government may want to portray it as a Wizard of Oz administration, skipping down the yellow brick road to Brexit. Under this scenario Hammond is the tinman with no heart, David Davis is the lion who lacks courage (to launch a leadership bid) and Boris is the scarecrow with no brains (not least in reading scripts about Brits in Iranian jails). May meanwhile, is seen by many on the Left as the Wicked Witch of the West.

The truth however may be much, much more mundane. After seven years of a Tory-led administration, the voters are weary and want something to change. With no majority, no money and no certainty on Brexit yet, May and Hammond are boxed in. And in the Budget there was little genuine thinking outside the box. That ‘nothing has changed’ remains toxic for both them and their party.

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